Exports, Consumption, and Tax Revenue All Soaring High

National Tax Revenue of 88.5 Trillion Won from January to March

[Image source=Yonhap News]

[Sejong=Asia Economy Reporters Kim Hyunjung, Kwon Haeyoung, Jang Sehee] As economic indicators such as exports, consumption, and investment all show signs of improvement, the 'annual growth rate in the 4% range' target mentioned by President Moon Jae-in is gaining momentum. With tax revenues, which can gauge the economy, also improving, the government evaluated that a virtuous cycle with economic recovery has emerged.

According to the 'Monthly Fiscal Trends and Issues May Edition' published by the Ministry of Economy and Finance on the 11th, national tax revenue from January to March this year was 88.5 trillion won, an increase of 19 trillion won compared to the same period last year. The progress rate, which indicates the proportion of the actual amount collected against the annual tax collection target, rose by 7.0 percentage points to 31.3% compared to last year's 4th supplementary budget.

The three major tax items forming the basis of taxation (income tax, corporate tax, and value-added tax) all increased. Income tax revenue (28.6 trillion won) rose significantly by 6.4 trillion won due to an increase in real estate transaction volume (1.7%) and payments of some deferred comprehensive income tax from small individual business owners. Corporate tax revenue (20.2 trillion won) also increased by 4.8 trillion won as companies' operating profits improved. Additionally, other national tax revenues such as comprehensive real estate tax, securities transaction tax, and stamp tax (13.3 trillion won) increased by 3.3 trillion won, and value-added tax revenue rose by 2.7 trillion won.

As fiscal spending increased for COVID-19 response, job support, and quarantine measures, total expenditure in the first quarter reached 182.2 trillion won, up 17.4 trillion won from last year. However, with increased tax revenues, the fiscal balance showed significant improvement.

The cumulative integrated fiscal balance from January to March showed a deficit of 30.1 trillion won. The deficit narrowed by 15.2 trillion won compared to the same period a year ago. The management fiscal balance, which excludes the four major social security funds from the integrated fiscal balance to show the government's actual fiscal condition, recorded a deficit of 48.6 trillion won, but this deficit decreased by 6.7 trillion won compared to last year. Regarding this, Deputy Minister of Economy and Finance Ahn Do-geol said, "A virtuous cycle of economic recovery and consequent tax revenue improvement, supported by proactive fiscal management during the COVID-19 crisis, has begun to appear."

Exports are also rapidly recovering from the COVID-19 shock. According to the Korea Customs Service, export value from May 1 to 10 was 12.5 billion dollars, an increase of 81.2% compared to the same period last year, and the daily average export value was 2.27 billion dollars, up 64.7%. The cumulative export value this year increased by 21.2% (36.81 billion dollars) compared to the same period last year, reaching 210.1 billion dollars.

Reflecting the overall recovery mood in the economy, President Moon Jae-in mentioned a 4% range economic growth rate this year and set the official goal of entering a growth recovery trajectory. In a special speech on the 4th anniversary of his inauguration the day before, President Moon stated, "We will mobilize all government capabilities and enhance private sector vitality to achieve a growth rate of over 4%." Initially, the government projected a 3.2% real GDP growth rate for this year, but the first quarter growth rate (preliminary figure) recorded 1.6% (quarter-on-quarter), significantly exceeding expectations. Next month, along with the announcement of economic policy directions, a growth rate forecast similar to the president's target is expected to be released.